Posted
by
Soulskill
on Monday August 02, 2010 @02:47PM
from the no-public-option dept.

Back in January we discussed Intuit's opposition to California's free, convenient software to file tax returns. TechDirt noticed a recent article in the LA Times about Intuit's continued lobbying efforts to get rid of those programs. Quoting:
"Most importantly, Intuit is offering nothing that California doesn't already have. The state has arranged with other tax software providers to do exactly what Intuit proposes: Help low-income folks fill in and file state and federal returns for free — although Intuit refuses to participate. It apparently only wants in on this deal if the state knocks out its free programs, thereby creating a larger potential paying customer base for TurboTax. Not surprisingly, Intuit has been greasing the wheels in order to try to sell its scheme in California. Since 2005, public filings indicate that Intuit has spent $1.25 million on lobbyists in the state. Over the same period, it contributed an additional $2.12 million to statewide campaigns, including more than $1 million to state Sen. Tony Strickland (R-Thousand Oaks), a ReadyReturn foe who is running for state controller. In all, Intuit has doled out cash to nearly 120 politicians. The impact has been clear, even if Intuit hasn't gotten its way — yet. As documented in The Times, in 2009 California Republican legislators held back their votes on 20 bills in an attempt to do the corporation's bidding and force the abolition of ReadyReturn and CalFile. They didn't succeed in killing the tax programs, but they did kill funding for domestic violence shelters, police and fire departments, and prevention of swine flu outbreaks."

So, let me get this right. A tax code is so confusing and complicated - in part because of lobbyists and politicians carving out special exceptions for each other and special punishment for their enemies - that even cash-strapped California sees the need to assist its citizens with compliance? And the result is *more* lobbying from a company that's (frankly) had a windfall for years because of the degree of difficulty of that compliance, to convince the state... to help the company *make money* from its constituents instead of helping those constituents? Unbelievable.

Wait, what? iFile was great, and I'll be pissed if it's gone. IIRC TurboTax wanted an outrageous amount of money to file state taxes which I laughed at because Virginia has (had?) such an great online system.
Really, ever since Day 1 the Web has been fantastic at putting up forms for people to fill out. The IRS could have built their own website 15 years ago if they wanted, but one feels that they've gotten so cozy with HR Block, Turbotax, Legions of CPAs, etc... that they didn't want to rock the boat. It feels like the buggy whip manufacturers convinced the government that automobiles shouldn't be allowed on public roads because it would hurt their industry. (woo! Car analogy!)

It occurs to me that a simple percentage based income tax would not require anything more complicated than your W-2 form and a calculator to figure out. But why would we do something as silly as that when we can use the tax code for social engineering and as a rewards system for favored industries instead?

The tax code is so complicated because there is a legacy of decades of politicians finessing it to raise needed taxes without LOOKING like they're raising taxes (or restricting raises in such as way as to exclude most voters). Add to this the fact that this is happening on at least *two* levels (federal and state, and sometimes even city and/or county) and you end up with an almost hopelessly complex system.

Politicians are too cowardly to just come forward and say "We need to raise income taxes, because of X, Y, and Z" so they quietly sneak in shit like "A 2% business tax increase for fishing businesses earning over $100,000 a year with 12 or more employees." Repeat this over decades and you get a tax code that reads like the source code of Windows Vista.

Its even worse than that.. Our government is the only organization I have ever heard of that refuses to tell you how much you owe!

Could you imagine if you went to buy a car, and the ford dealership gave you the keys, then told you to submit payment, but never told you the price of the car? Especially if they threatened to come after you with the Police and lock you up for not paying correctly?

Fairtax all the way. I find it silly that we have to hire people to tell us how much we owe....

No, a program like "Fair" Tax won't pass because it's ultimately regressive with respect to percentage of disposable income retained by low-income participants after payment of this tax and would only be used as a stalking horse for reducing the percentage paid by upper-bracket individuals while still allowing many deductions available to said upper-bracket individuals (unless you can tell me with a straight face that the government will give up all tax-related financial engineering via the tax code). People who really believe that the "Fair" Tax would really be fair are the same folks who could believe that a Libertarian government is more realistic than a Communist one, i.e., simplistic minds with simplistic solutions which lead to horrific consequences. But go for it. Destroying our government and devolving into anarchy should be on everyone's short list of things to do (and, yes, I'm being sarcastic about this last part - note added for the simplistic minded).

People are second class citizens in America because the amount of money and votes they can contribute to a politician is severely limited.

Corporations are first class citizens in America because it is a violation of human free speech rights for non-humans to have limited ability to bribe..., I mean donate to the campaign of, politicians.

Because 'simple' systems are really easy to abuse? And planned economies tend to be more stable and have better long term growth then completely laissez-faire ones?

Answers to your questions:1. No --> and if it is really that difficult for you to understand how it's about a million times easier to abuse a tax system full of loopholes and ambiguities, I feel sorry for you.2. No:
With your "planned" economy, you can either get a fun-filled central planner who gets rid of all those "evil" companies at the butt-end of a rifle... or you can get the current implementation of planned economies that we have in the US (and especially in California) where multiple interests compete to outlaw one another by hijacking an oversized and overpowered bureaucracy. Either way is bad news, and convoluted tax laws are a powerful club to use in micromanaging other people's lives.

You do realize that corporations just pass their taxes along to their consumers as a cost of doing business, right?

Only if their price elasticity of demand is infinite - which, barring a very few things like gasoline, it isn't. If it was, there wouldn't be a thriving industry that revolves around exploiting legal loopholes to hide corporate income offshore and buying the right politicians to make moar loopholes.

Corporations are first class citizens in America because it is a violation of human free speech rights for non-humans to have limited ability to bribe..., I mean donate to the campaign of, politicians.

Corporations can't donate to political campaigns but why let the truth get in the way of your talking points?

I was going to post a retort with the facts about it and then I realized it won't make a difference. Besides, I don't know why you don't like it and I don't feel like tackling all the criticisms about it.

Let's get this out of the way: All tax systems suck. None are "fair" There's no way to make it fair. We all take it up the ass because we the little people have always done that - things have never changed OK?

So why not make the pain a little easier and save the preparation costs every year?

No, a program like "Fair" Tax won't pass because it's ultimately regressive with respect to percentage of disposable income retained by low-income participants after payment of this tax

So it's more fair for the law to treat you differently based on how much money you earn? Equal Protection should apply to all the laws except the tax code?

only be used as a stalking horse for reducing the percentage paid by upper-bracket individuals while still allowing many deductions available to said upper-bracket individuals

You realize that almost half of this country pays no income tax whatsoever, right? It seems silly to think that the upper-brackets are getting the sweetheart deal when nearly half of the working population pays nothing.

Yet most people with an eighth-grade education can manage to fill out their 1040-EZ without hiring H&R Block.

Unless you have racehorses (you wouldn't believe the tax law regarding owning race horses) the majority of people manage to file without problems.

The complications in the tax law come from business and tax lawyers, who each have their own agenda. I'm sure the government would be happy to say "give us 35%, period", but then the oil lobby wouldn't get their subsidies and the home builders' lobby wouldn't have their products artificially valued, and the religious wouldn't be able to punish single people or homosexuals, and Churches wouldn't have their collections subsidized by the government, etc etc.

If you've ever looked at the 25+ volume set of the Revenue Act and IRS Code, you'd see that most of the complications come from loopholes, exceptions and deductions rather than from diabolical ways to squeeze more taxes out of people.

But knowing that spoils the fun of believing the FUD about how Americans are getting "taxed to death" and how it's "nearly impossible" for a normal person to file their own taxes.

A large disbursement (or "minimum income" or "initial rebate" or whatever they're calling it this week) simply means that the middle class gets screwed over rather than the lower class. The whole scheme still amounts to a huge tax break for the rich.

Its even worse than that.. Our government is the only organization I have ever heard of that refuses to tell you how much you owe!

They don't refuse to do that. They just allow you to calculate it yourself.

You can always ask the IRS to calculate your tax for you... they'll be glad to do so, as long as you make an estimated payment of net taxes due at filing time.

Seriously, where do you wingnuts get your "facts" from? A cracker-jack box?

I find it silly that we have to hire people to tell us how much we owe....

If you need to hire someone to calculate how much you owe, you must be stupid. It's ridiculously easy, you just need to follow some instructions. What's silly is that so many people are so bad at basic arithmetic and language that they can't follow a form that was written to a seventh-grade level.

And yes, I've been self-employed and received a W2 in the same year, along with capital gains tax due. It's not hard. It takes some time. People pay others to do it because it's convenient, or because they have an irrational fear of forms and numbers.

I won't comment on fairtax, arguing about it with you would be a waste of time. But the reason you cite... it's just false.

Unfortunately, those on the low end of the wealth scale use most of their money to live, while those on the other end of the scale use most of their money... to make more money. That is why a lot of people see the "fair" tax as not fair.

You realize that almost half of this country pays no income tax whatsoever, right? It seems silly to think that the upper-brackets are getting the sweetheart deal when nearly half of the working population pays nothing.

How did half of the country become equivalent to half of the working population? Those are two pretty different numbers.

So it's more fair for the law to treat you differently based on how much money you earn?

The tax lax assesses income in brackets, not overall income.

Equal Protection should apply to all the laws except the tax code?

The tax code treats everybody the same. Everyone is taxed at the same rate for the money they earn in the first tax bracket, the second tax bracket and so on.

That many people don't make any money in the 3rd or 4th or 5th tax bracket is no reason for those who did make money in those brackets to bitch about unfairness. All it does is expose their ignorance of what a progressive tax scheme is.

It occurs to me that a simple percentage based income tax would not require anything more complicated than your W-2 form and a calculator to figure out.

The reason you are wrong is because you first have to define "income" and doing that is actually quite complicated. Seriously - it's not easy. Especially if you don't want any loopholes. Just define income as W2 earnings and every taxpayer will magically make no money on their W2's the following year and all of them will be compensated some other way that isn't taxable. I'd be perfectly happy to be compensated in stock grants or in bullion instead of fiat currency if my compensation wasn't taxable. If a loophole is available people will take advantage of it and while we dislike taxes, they are actually necessary for the efficient functioning of society.

It is true that some of the social engineering has made our tax code more complicated, but MOST of the complication is simply due to the difficulty of defining what income is (and what it is not). The social engineering bits add a little to the complication but they aren't what keeps your friendly neighborhood CPA employed. The actual payment calculations are pretty simple even now. For what it is worth, if your financial picture is very simple you probably actually can do your taxes with just a 1040, a W2 and your calculator. This describes more people than you might think.

I buy expensive shoes when I can afford it. I spend, say $100. That $100 buys me a good pair of shoes that lasts me maybe 2 years.

The guy one income bracket down buys the cheap shoes because he never has $100 cash on hand. He spends the $20 he has to get a passable pair of shoes. In those 2 years he replaces them 8 times.

In two years he has spent and been taxed on $160, I have spent and been taxed on $100. This is not because he *likes* his $20 shoes, it's not because he's simply being short-sighted. It's because he simply doesn't have $100 to spend all at once on shoes.

Now, apply this same concept to any commodity or property you like. The Sales Tax based solutions *always* favor the rich who have far greater latitude to manage their money into tax-free ventures just by virtue of having more of it at any given time.

Actually such systems are pretty easy to game, just make sure whatever you do does not count as 'income'.

A fair system would count all sources of monetary gain as 'income'.

It's broken right now. I play the stock market -- but I'm not rich. I will still pay the same 30% short term (soon to be long term too) cap gains rate even though my actual Federal income tax bracket is much lower than this. Likewise, a rich person in a higher bracket would pay a reduced rate for his capital gains compared to the rest of his income.

If it was just considered income and taxed accordingly it would be much harder to game the system.

it always seems with companies that offer marginally useful services are always fighting to stop others from helping, rather than improve their product so that it becomes useful. if people would only realize that it's not that difficult to do their taxes, they wouldn't need intuit's software.

It's even more simple than that. Poor people spend a much higher percent of their income than the rich. Typically, the poor spend 100% of their income. That alone makes it easy to see that a sales tax approach would tax, as a percent of income, the poor, much more than the rich.

Try flat tax plus a rebate. You give welfare checks to *everyone*, not just the unemployed or pensioners. This means that if you don't have a job then you get a small amount of money. If you get a job then you keep getting checks. This allows a fairly steep flat rate tax while maintaining a passable standard of living for low-earners. It gives incentive to earn an income without getting caught in a welfare trap. You keep every penny that you earn. It also eliminates several classes of tax fraud.

Most importantly, it provides a way to manage immigration. If you're not a citizen then you still pay flat rate tax but you don't get the rebate. This gives a home advantage to voters while allowing productive foreigners to contribute to an economy.

You obviously didn't pay enough attention to what the OP was saying in the third paragraph and made his argument for him. Perhaps you need Taxes 202, too.

So do the best of both... Institute a flat tax while allowing a cost of living deduction, say $30,000 just to throw a number out there, on the income. Earn anywhere up to $30,000? Pay nothing. Earn $90,000, pay tax on $60,000. Earn $1,000,000, pay tax on $970,000. The simplicity of a flat tax with the humanity of a progressive tax.

Congratulations, you just reinvented the progressive tax: 10% of 60K is 6.67% of 90K, but 10% of 970K is %9.7 of 1M. I.e. your tax rate starts at 0% below 30K and asymptotically approaches 10%. A very simple progressive tax, a very appealing progressive tax, but a progressive tax.

I don't stick butter knives in electrical outlets because I'm not a raging moron.

The guy one income bracket down does, though, because he's a raging moron.

Now apply this to taxes. Clearly, we must do away with electricity because of all the raging morons out there. Also, sales-tax based solutions are fair. I'm sorry that there are folks out there who can't figure out that saving their money for worthwhile purchases is a senseful thing to do.

The current IRS employees doesn't want to provide any information or services that would interfere with private sector services because the private sector services are opportunity for employment after retiring from the IRS. Regardless whether interactive forms or answers to tax questions.

How do they get a massive tax break? Most of the "very rich" don't even pay income taxes today. Haven't you heard Warren Buffet making the statement that his secretary pays a higher tax rate than he does? Their profits are from capital gains, which are not taxed as income. You're saying you like that system better?

That's a separate issue, the classification of income. One does not need to throw out the baby with the bathwater. While people like Warren Buffet are an exception, there are many, many thousands of people at the highest end that would see their tax burden decrease under the so-called "fair" tax. Furthermore, Warren Buffet does pay capital gains tax. His tax burden is not zero; just his income tax burden. Are you deliberately misconstruing his tax burden to support your argument, or was it an honest mistake?

Huh? We're not talking about a flat income tax.

Sorry, typo. I think I did that a couple times, it comes from my aversion to calling the so-called "fair" tax the fair tax. It's not a fair tax in my opinion, and I think the misnomer is a disingenuous way of lending the idea merit.

If the more you spend (and you can't spend what you don't have), the higher your percentage of taxation is, HOW CAN THAT BE REGRESSIVE? Regressive means the rate of taxation increases as what is taxed decreases. You may not like the tax, but you can't redefine words to argue against it.

I'm not redefining words. You are redefining contexts. Consumption taxes are regressive as a function of income... perhaps for some reason it was not clear to you, despite the fact that both your examples, and my writings, and general discussion of progressive taxes, are based on comparisons of income?

I don't think you really do understand the current system or the fair tax. That's fine if you are open to looking, but your statements make it clear that you have some bias against the idea, which means you're ignorant, not stupid.

No. My statements make it clear that I do not agree with the premise of the "fair" tax. It is possible for someone to understand an idea, without agreeing with that idea. Your error here is a classic one that intelligent people often make... that if people understand an issue, they must come to the same conclusion you have. I would actually posit that the ignorance here is on your side, because not once have you touched on the economic impacts of the "fair" tax. In addition, it is clear to me that you are making a lot of assumptions about my knowledge of the subject, and about my motivations. More on that below.

The fair tax is specifically designed to have a net neutral effect on people's current tax situation. It just changes how it's collected and eliminates the loopholes that the "rich" keep getting in our current system.

And yet every proposal for a "fair" tax on consumption results in a lower tax burden on the extremely wealthy, and a higher tax burden on the middle class. EVERY single proposal I've seen for a "fair" tax results in this under analysis. If you can cite a single proposal where this is not the case, please share it... I'd be very interested in seeing one that doesn't shift the tax burden like this.

It seems like you just have a grudge with people that have money. That's ok if you do, but you just need to be honest that you think that people that have reached a certain level of financial success could have only done it through nefarious means. Otherwise, why would you feel so compelled that they be punished?

You certainly have issues with having reasoned debate. I am relatively wealthy; I do not want for anything; I will be able to pay for my kids' college tuitions; I will be able to retire comfortably in my late fifties or early sixties, depending on returns on investments. I also understand that a signif